The results of the 2024 Working Relations Index® (WRI®) Study are in, and the findings are telling. The WRI® Study measures the strength of the commercial relationships between Ford, General Motors, Honda, Nissan, Stellantis, and Toyota and their direct suppliers. It’s also a proxy of the capability and capacity of these vehicle manufacturers to deal with the industry's macroeconomic and industry-specific issues, including the massive transformation to electric vehicle propulsion.
The survey drew 696 responses from executives at 429 discrete companies, 69 of which were from the 100 largest North American suppliers. The supplier survey includes 16 questions measuring buyer characteristics and 18 questions about business implications, 22 of which covered trust, communication, mutual profitability, assistance, and hindrance.
Why do customer-supplier relationships matter?
Suppliers responding to the study rate their customers on important characteristics influencing the suppliers’ ability to serve the customer. Better customer-supplier relations create more timely and effective responses to unforeseen market conditions, including supply chain disruptions, quality problems, and late product development changes. Suppliers respond to customers with better customer-supplier relationships by:
- Communicating openly and honestly with the customer. Reporting issues, providing time to react and mitigate situations from production disruptions to quality-related warranty and recalls.
- Supporting the customer above and beyond contract obligations. Providing resources beyond what’s “paid for” in the contract to ensure operational flexibility.
- Assigning the best people and resources to support the customer. Providing the best customer service outside of normal operating conditions.
WRI® Study results
The rankings of the six OEMs remained the same as the previous year: Toyota was ranked first, followed by Honda, General Motors, Nissan, Ford, and Stellantis. With Toyota’s 30-point increase versus Stellantis’ seven-point increase, the gap between Toyota and Stellantis increased from 193 points in 2023 to 216 points in 2024. That gap is driven by the fact that 57% of Toyota responses report having good or very good relations on the WRI scale, while only 9% of Stellantis respondents say the same.
Large movers included Nissan with a 30-point increase, driven by a concerted effort to improve supplier relations that included top leadership. Nissan focused on rewarding high-performing suppliers for helping the vehicle manufacturer manage through supply chain and production disruptions. Suppliers rated Ford 22 points lower based on negative buyer relationships and friction from its business practices.
Auto industry implications
Respondents’ comments call for new business practices to match industry risks that aren’t likely to go away. These risks include volatile production schedules due to uncertain customer EV demand, material and supply chain inflation, and new battery value chain materials needing to be sourced and processed from new suppliers. Given that the industry is unlikely to eliminate or even minimize these and other inherent risks, the industry needs to accommodate these risks through:
- Flexible pricing mechanisms — allowing suppliers to recover fixed investment on lower actual production volumes.
- Flexible capacity investing — allowing suppliers to match maximum production capacity investment to actual production volumes over the life of the contract versus at the start of production.
- Separating supplier fixed investment from variable component production — allowing suppliers to recover upfront engineering, development, and tooling investments unrelated to production volume schedules.
Company implications
Two tiers are emerging in the North American industry: a top tier with Toyota, Honda, and General Motors and a lower tier with Ford and Stellantis. With four consecutive WRI annual increases, Nissan is in the middle, making a clear run to the top tier. OEMs in the WRI top tier are associated with lower costs to serve, improving the profit margins for the customer and the supplier. Higher profit margins allow greater market competitiveness, from the ability to attract financial resources to the ability to invest in product innovation. This financial competitiveness and lower costs to serve are further reinforced by suppliers’ greater allocation of scarce engineering, manufacturing capacity, and customer resources, making top-tier customers with better supplier relationships, as measured by the WRI, that much more competitive in the marketplace.
How to use the study
Customers use this study to measure the effectiveness of policy changes, cost-reduction programs, and the subsequent financial sharing of those cost savings with suppliers. They use this anonymous, honest data to shape purchasing personnel onboarding and culture training. The study’s findings generally help better align internal functions such as engineering to support purchasing that reduces unintended supplier costs.
Suppliers use the study to adjust their commercial strategies, such as informing account managers coming onto new accounts what they can expect to see from their new customers. Suppliers also match the level of investment, such as research and development, product engineering, or overall human resources, they put into specific customers. Every OEM has good, adequate, and poor relationships. Suppliers should match their expectations of the relationship with the actual relationship to determine the level of investment they put into the commercial relationship.
